Risk Control And Value Creation In Securities Company

Securities Company is one of the most important intermediaries in the capital market and plays a decisive role for the healthy development of the capital market. We can say that the size of securities firms to take risks and risk control capabilities directly related to the level of security and stability in the capital market. How to prevent securities companies from taking too much risk, and thus on the country's financial order, economic development and causing damage to the public interest is always major problem which securities regulatory authorities around the world have to face. For this reason, in practice, many securities companies put too much focus on risk control to neglect another important aspect of the business--value creation.The development course of Chinese Securities Companies has fully reflected this point. Before 2004, as a result of birth defects and shortcomings of structure and mechanism design, our Securities Companies assumed too much risk. This issue cropped up around year 2004:A number of Securities Companies suffering heavy losses, capital strand breaks, or even bankrupt one after another, which lead to a substantial decline in the whole credit industry, near the brink of collapse. Subsequently, the Commission promptly launched a comprehensive management of securities companies, reformed and improved the various basic systems, generally increased consciousness of risk control and compliance management awareness in the Securities Companies. However, after the rectification, some securities firms overcorrected the understanding and control of risk; innovation and motivation was obviously inadequate; nobody wanted high-risk high-yield business, for shareholder value creation ability became seriously inadequate.For businesses, "creating value" is its true meaning lies. That is to say, from a fundamental point of view, competition among enterprises is the contest between value creation capabilities; enterprise value creation and enhancement of enterprise value is the enterprise long prosperity and sustainable development of the country. If the Securities Company is restricted by the risk too much and limited to less risk business, then the value created for shareholders will have less inevitable; if Securities Companies involved in high-risk business too much and followed by single-minded pursuit of high returns, then the value created for shareholders may not necessarily be large, obviously not conducive to capital markets, security and stability, either. Thus, in essence, Securities Companies should through the "business risk", in the premise of matching risks and benefits, achieve the maximum value of the company's business objectives.Because of this reason, for securities companies, how to effectively control risk and combine risk control and value creation in order to achieve the maximization of value creation securities firms? Answers to this question, not only enriched the securities company's risk control and value creation related theories, but also has a certain practical significance to the securities company's operating management practices.Based on literature about risk control and value creation and combined with the specific situation of China's securities companies, this paper introduced economic value added (EVA) indicators. It adjusted Net Operating Profit after Tax Indicator and Capital Change Indicator according to the type of business securities companies and deeply explored the application of the indicator in a securities company in order to achieve comparison of the relationship between risk control and value creation; Then based on comprehensive analysis of the securities industry, it elected three typical cases of Hai Tong Securities, Da Peng Securities and China International Capital Corporation to conduct in-depth study, calculated last 3 years'EVA and RAROC to confirm earlier theoretical framework; meanwhile, it refined a general conceptual framework of the relationship between risk control and value creation.This paper is divided into six parts:The first part is the introduction, which introduced train of thought, the purpose of this research, research methods and the main innovation points, and arranged the structure of this article.The second part is literature review, combing with the risk control and value creation related to the theory of literature and comment on them in order to find this entry point for the future research. It is the logical starting point of the below theory and case studies.The third part is the definition of risk and the value of Securities Company related concepts. It clears the relationship between risk and value of Securities Company and lays the theoretical and conceptual basis.Part Four is the focus of this article. Based on the EVA theory, it links the risk control and value creation of Securities Company, explores the relationship between risk control and value creation; namely, the risk-adjusted value maximization of securities companies.The fifth part plans to propose multi-case study method, which is intended to confirm earlier theoretical framework, deeply dig inherent relationship between risk control and value creation, and refine a more general conceptual framework.The last part is the conclusion. It summarized the main conclusions of this article with the revelation, and made the inadequacies of this article and follow-up research.